British Virgin Islands: Why The British Virgin Islands? A Guide To Setting Up And Doing Business

Why the BVI?

The British Virgin Islands (BVI) is a British Overseas Territory and is the world's pre-eminent corporate domicile.

Since the adoption of its pioneering Business Companies Act 2004 over 500,000 companies have been incorporated in the territory. Approximately 850,000 companies have been registered since 1984.

The BVI has a sophisticated and innovative legislative framework. This has made it a popular jurisdiction to incorporate private and holding companies, as well as public companies prior to admission to international stock exchanges. Companies incorporated in the BVI can list on the London Stock Exchange (LSE), LSE's AIM, the New York Stock Exchange, NASDAQ, the Hong Kong Stock Exchange, the International Securities Exchange and the Toronto Stock Exchange.

Key facts

  • The BVI is the world's leading offshore centre with more offshore companies than any other country.
  • The jurisdiction appears on the OECD's "white list" reflecting a high level of tax transparency, regulatory and compliance standards.
  • The BVI is recognised as a leading financial centre. The BVI was 34th in the list of leading G2 international financial centres in the Global Financial Centres Index (GFCI) published by the City of London ranked above Shanghai, Bahrain, Qatar, Milan, Madrid and Mumbai.
  • A Financial Times survey confirmed the BVI as the second largest source of international foreign direct investment globally, with upwards of US$125 billion invested through the BVI each year.
  • The BVI has zero-rated corporation tax, with no wealth, capital gains or estate tax for offshore entities.
  • The administrative burden and costs of incorporating or maintaining a company in the BVI are low. BVI companies are operationally flexible. Corporate governance can be adapted to suit the structure.
  • The BVI has a familiar and established legal and court system based on English common law. This offers a stable and certain framework for investors.
  • The BVI has no exchange controls. The local currency is the US dollar.

Incorporating a company

International investors are attracted to the BVI by the strong regulatory framework, low tax and an established legal system, which ensures that the territory is a neutral and safe place to pool capital. This neutrality of venue makes it an appropriate place for outside investors to establish a holding company or to invest into markets where there may be political risk or legal barriers that deter direct investment.

A recent trend has been the number of Chinese based companies that have used BVI vehicles to float on NASDAQ and AIM as a means of raising funds. The ability for BVI companies to list in Hong Kong provides an important exit route enabling private equity investors to realise their holdings in China and other emerging markets.

BVI companies are often used as joint venture vehicles in Asia and Russia as a result of the protection given to shareholders and the ability to ring fence liabilities. There is no double layer of taxation beyond those that may exist in an investor's home country.

The BVI provides flexibility in structuring mergers and acquisitions, which enables a BVI company to merge with a foreign company. It is also possible to redomicile an existing foreign company into the BVI, or to redomicile an existing BVI company overseas.

Directors' duties are based upon English common law which provides certainty.

Hedge Funds

The BVI is popular with Hedge Fund managers and is the second largest Hedge Fund domicile in the world.


The BVI is the world's fourth largest captive domicile for enhanced insurance products and services. The BVI has introduced a new Insurance Act 2008, Insurance Regulations 2009 and Regulatory Code which came into force on 1 February 2010, replacing the Insurance Act 1994 and the Insurance Regulations 1995.

This new legislative framework ensures that the BVI remains an attractive environment for a range of insurance services and products.

Working with you

We can assist and advise regarding incorporating and establishing a BVI company, hedge fund or insurance captive. As a leading corporate and wealth planning firm with offices in the US, Europe, Asia and the Caribbean, we are uniquely placed to advise regarding structuring and incorporation of BVI companies. This includes the wealth planning and tax consequences of structuring an investment to planning a route to exit and realisation of investments as part of an Initial Public Offering (IPO), sale or private equity partnership.

The Financial Services Commission

The Financial Services Commission (FSC) regulates financial services activities operating in and from within the BVI, pursuant to BVI laws to ensure compliance with relevant international standards and conduct of business practices.

The FSC's mandate includes banking and fiduciary business, investment business, insolvency services, insurance business, company management, company registration and intellectual property. The FSC seeks to promote accountability, transparency and good governance.

The jurisdiction has benefited from collaboration between the FSC and private sector stakeholders in developing the financial services environment, which has ensured that the BVI remains competitive and attractive for legitimate business.

BVI IOSCO membership

In recognition of the BVI's international cooperation framework and its long-standing commitment to comply with international standards, the FSC was welcomed as an ordinary member of the International Organisation of Securities Commissions (IOSCO) in April 2007.

IOSCO's executive committee recommended the BVI's membership having concluded that the BVI had complied with all of the standards and requirements outlined in the IOSCO Multilateral Memorandum of Understanding (MoU) concerning consultation, cooperation and the exchange of information. The BVI was the first country to be admitted to ordinary membership of IOSCO based on changes it has made to its legislation under the MoU.

IOSCO is recognised as the international standard setter for securities markets, and membership is widely sought after by securities regulators. Becoming a member of IOSCO is a very important accomplishment for the BVI as it confirms that it is one of the premier and most effectively regulated offshore jurisdictions in the world.

Commercial Court

The BVI has a respected and established Court system based upon English common law. The territory is part of the Eastern Caribbean Supreme Court (ECSC) region.

A new specialist Commercial Court was created in the BVI in 2009 to reflect the importance of the territory as a leading financial centre. The Court is a specialist division of the High Court of the ECSC and hears commercial and finance matters from the BVI.

The Court is equipped with advanced facilities including video link and transcription technology and has established a reputation as a centre of excellence and fairness. Leading legal professionals and QCs from around the world appear before the Court dealing with complex cross-border commercial and insolvency matters.

Appeals are to the Eastern Caribbean Court of Appeal, with a further right of appeal to the Privy Council in England.

Anti-money laundering regime

The BVI introduced enhanced money laundering regulations in 2008 supplementing the regime that exists under the Proceeds of Criminal Conduct Act 1997 (PCCA).

The Anti-Money Laundering Regulations 2008 (as amended), the Anti-Money Laundering and Terrorist Financing Code of Practice 2008 (the "Code") and the PCCA, provide a comprehensive regime to counter money laundering and terrorist finance. This makes it an offence to possess proceeds of crime, or to assist, conceal or tip off persons who hold proceeds of crime.

The Code requires regulated firms to have rigorous KYC and customer due diligence systems and controls, compliance manuals and infrastructure to report suspicious transactions. The regime is now broadly consistent with the 40+9 Recommendations of the Financial Action Task Force (FATF).

Securities, Investment Business and Financial Services

Consistent with the FSC's obligations as a member of IOSCO, the BVI enacted the Securities and Investment Business Act 2010 (SIBA) and the Mutual Funds Regulations 2010. The legislation and regulations introduce a new investment business licensing regime which regulate investment advisors, broker-dealers, market-makers and custodians. They also deal with registration of public mutual funds, the recognition of private and professional funds and the control of offers of securities to the public in the Virgin Islands and creates offences relating to insider trading and market abuse.

Persons carrying on "Investment Business" as defined by SIBA in or from within the BVI are required to be licensed by the FSC. SIBA may affect non-BVI persons or companies providing investment services to BVI business companies unless they fall within exemptions set out in SIBA.

The BVI also introduced the Financing and Money Services Act 2009 ("FSMA") on 31 March 2010. FSMA ensures that the BVI meets or exceeds best practice for financial regulation and complies with Recommendation 23 of the FATF. FSMA introduces a regime for the licensing, regulation and supervision of financing and money services carried from or within the BVI, and criminal offences for non-compliance.

Trust Law

The BVI's trust laws are derived from English trust law. Principles of English common law and equity apply as supplemented by the trust laws of the BVI, the main statutes being the Trustee (Amendment) Acts 1993 and 2003, the Virgin Islands Special Trusts Act 2003, the Banks and Trust Companies Act 1990, and the Financial Services (Exemptions) Regulations 2007.

Considerable use has been made of the 2007 regulations to establish private trust companies (PTCs) for holding and consolidating family wealth whilst retaining significant control over the trustees' decisions by being directors of the PTC. PTCs are exempt from the requirement to obtain a trust license providing that they carry on either un-remunerated trust business or related trust business, that they do not undertake any other type of business, and that their services are not made available to the general public.

PTCs must also ensure that their Registered Agents hold the appropriate Class I trust license issued under the Banks and Trust Companies Act 1990. The PTC will be regarded as carrying on an unauthorised financial services business if the exemption is lost. New and existing PTCs will have to adopt "PTC" within their name to indicate their purpose.

There is no formal application process for exempt status. Exemption is automatic if the company meets the criteria in the regulations and the registered agent determines that the company qualifies as a PTC. The only documents that need to be completed are the PTC's Memorandum and Articles of Association along with a certificate from the first registered agent.

The 2007 regulations allow for the remuneration of directors and officers of the PTC in so far as they are made for professional director services provided to the PTC, and for certain costs and expenses incurred by the PTC. The PTC must have at least one director but there is no requirement for any of the directors to be resident in the BVI.

It has now become commonplace for the ownership and control of the PTC to be structured through a Vista trust under the Virgin Islands Special Trust Act, 2003.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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